Are brokers permanently broken, or
just temporarily maimed? The recent turmoil in the banking sector
has caused a barrage of problems for them.
It started with a hardening of the
banks’ credit underwriting policy. This was followed by increased
arrears and then, to crown it all, end-user customers began cutting
back on capital equipment expenditure.
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However, most significant has been the
large number of banks that closed their doors to new business from
the broker community. The speed and severity by which this happened
was marked.
Many leasing companies have built
their business on the back of brokers introducing business to them.
Using this method lessors can quickly gain volume, and not have the
overhead of large expensive sales teams.
On the back of this policy, the past
15 years have seen the creation of some large and highly successful
brokers. Their systems, infrastructure and sales reach is sometimes
greater than the banks they place the business with.
But even though a number of brokers
have become quasi-leasing companies with their own book,
receivables documentation and warehousing facilities, they still
rely on a portfolio of banks to place business with.
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By GlobalDataIt is fair to say most, if not all,
brokers have been affected in the past six weeks. Grenkeleasing,
BNP Paribas Lease Group and Lombard have culled (a popular leasing
term) many, but not all, brokers.
Culling takes place for a number of
reasons – too much bad debt, not enough business or high rejection
rates. At least that is what they tell brokers. It may be they also
ran out of cash. Total termination, a much more severe form of
culling, has taken place at Barclays Asset & Sales Finance,
Bibby Leasing, and Universal Leasing.
For those funders left, realignment is
the order of the day. Some have pulled out of financing specific
equipment such as telecoms, CCTV and EPOS, while others are keeping
away from customers such as pubs and property companies.
One lessor has taken the interesting
step of not underwriting deals under £15,000.
For the time being, brokers are
beating their most prevalent competition – cash. With high-street
banks not providing loans/overdraft facilities and companies
preserving cash, leasing is still a popular option when financing
assets.
The tightening of underwriting means
some direct relationships with the likes of Barclays Asset Finance
and Lombard are not as strong. Brokers are now winning more new
customers than they would have ever dreamed of six months ago.
Finance companies come and go. The
broker market survived when they left, and will survive this recent
culling. New lessors will enter the market and existing ones will
come back in. Of course, these finance companies will not be
chasing volume. Value is the new buzz word.
So has Armageddon struck in
brokerland? No, not really. They may lose a few staff and put
buying the new Porsche on hold, but brokers are well and truly
entrenched in the leasing community, and are here to stay.
The author is the founder of Wyse
Leasing and CEO of WestWon Capital y
